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While home sales in September were down slightly from a relatively strong month in August, they were up from a year ago, giving encouraging signs of a strengthening market and potential for stabilizing, if not appreciating, home prices. These signs include an increasing demand, shown by the number of people shopping for homes, and the decreasing inventory of homes for sale, in conjunction with some of the lowest levels of new housing construction since 1960s when the Beatles first came to the United States.
Of the 3.48 million homes sold in September, 32% were first-time home buyers. With more and more people entering the market, the persisting obstacle for most is still the restrictive lending environment. In a plea to banks and policy makers, NAR President Ron Phipps said, “We need to remove the roadblocks to a housing recovery—not place more obstacles in the way of financially qualified buyers.”
With an increasing demand and shrinking inventory, it is hoped that banks will begin to see the market potential and start to lend to otherwise creditworthy home shoppers, opening the road to a more rapid recovery. While consumer confidence still remains at all-time lows, retail spending increased 1.1% last month, a positive sign of growth fueled by the approaching holiday season, which could propel the U.S. into a promising new year.
More Mortgage Aid Offers Refinancing Hope to a Potential 3 Million Homeowners:
The Federal Housing Finance Agency (FHFA) announced on Monday, October 24, 2011, that they were rewriting parts of the Home Affordable Refinance Program (HARP) in an effort to help more homeowners struggling to make their monthly mortgage payments eligible for refinance. It is estimated that the changes to HARP could help somewhere between 500,000 to 3 million households take advantage of historically low interest rates by refinancing their home.
While taking steps to help lower monthly mortgage payments, the FHFA will not consider actions to lower principal or forgive amounts borrowed.
Senators Grow Impatient with Mounting Foreclosures:
As Fannie Mae and Freddie Mac continue to absorb more and more foreclosures, senators in Washington are growing impatient with the way these distressed properties are being handled. To express their frustrations, thirty-three senators authored a letter to the FHFA, which stated that 10.4 million households are facing the possibility of defaulting on their mortgages, and asked when the joint venture between Fannie Mae, Freddie Mac, the Department of Housing and Urban Development (HUD), and the Treasury Department—formed for the purpose of developing a plan to handle the foreclosed properties—would have a solution. The urgency to put these homes back on the market is compounded by the financial risk that these distressed properties represent to Fannie Mae and Freddie Mac.
In response to these pressures, the joint venture has issued a request to other organizations, including private sector investors and businesses, to suggest ideas as to how to efficiently get these properties back on the market in a way that will benefit all parties involved.
Sources: National Association Of Realtors, FHFA, Wall Street Journal, Inman
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Despite some pessimism pertaining to the global and domestic economies, the U.S. housing sector continues to show promising signs of stability and growth. Low levels of new home construction and gaining sales volume fueled by an inventory of affordable housing since Richard Nixon was president have reduced the number of homes on the market. This means home prices may begin to appreciate again.
While there are many factors that can be barriers to buying a home, such as the tightening of mortgage lending rules by banks, consumer confidence in the job market is among one of the top obstacles to home ownership. In the 2011 Housing Pulse Survey conducted by the National Association of Realtors, 80% of respondents cited job security as their primary concern when deciding to buy.
For only the fourth time since the beginning of 2010, home sales in August were up both year-over-year and month-over-month, posting an 18.6% gain from last year, with first-time home buyers accounting for nearly a third of all homes purchased. These indications of strength in the housing market may help to add to consumer confidence, which is an integral part of sustained growth. Even though there is still a long road to recovery ahead of us, there are opportunities to be had for both home buyers and sellers.
Home ownership became even more affordable, with the average rate for 30-year fixed mortgages falling to 4.01% the last week in September. This drop came as a result of the Federal Reserve extending the average maturity of its holdings as a part of the Maturity Extension Program, an effort designed to put downward pressure on interest rates and yields on treasury bonds in order to stimulate the economy. It is hoped that this action will encourage banks to loosen lending conditions, as it becomes more attractive to loan money to home buyers, rather than invest in treasury bonds.
Sources: National Association Of Realtors, Freddie Mac
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The U.S. housing market has shown notable stability in 2011 compared to the previous two years when the tax credit made a clear impact. Although recent economic indicators have been less than expected, including a downward revision of GDP and consumer confidence that mirrors early 2009, owning a home is still valued by the majority of Americans. 72% of renters say owning is a top priority for their future, up from 68% a year earlier.
However, most aspiring homeowners are held back by two main factors: funds for a down payment (82%) and confidence in their job security (80%). Federal Reserve Chair Ben Bernanke emphasized the importance of a healthy housing market to a robust recovery. He stressed the adverse effects of tighter credit conditions for borrowers, urging Congress to take tax and policy measures to help stabilize the market. He also noted the significance of addressing long-term fiscal policies including debt levels, upcoming expenses to support an aging population, and taxes.
Buyers continue to benefit from historically favorable buying conditions, and sellers are encouraged by increased market stability. Although the Fed made a commitment to keep its interest rate at the current level until mid-2013, mortgage rates can, and often do, still fluctuate. In the midst of these reports, it is important to keep in mind the path to recovery was always expected to be a long and uneven road. As we progress toward a stronger recovery, economic improvement typically spurs rising interest rates in order to keep inflation in line.
Home Updating:
As the weather gets cooler, some homeowners could be considering undertaking home renovations or updates before the holiday season. Here are a few findings about updates and home sales:
~ Homeowners typically spend considerably more on updates to their home when planning to live in and enjoy it, with an average of nearly $9,000.
~ In contrast, they only spend an average of $3,400 when making updates in preparation to sell.
~ The most common updates sellers performed before listing were paint, flooring, and light fixtures.
~ Although the majority of buyers were least likely to compromise on the location, 16% were least likely to compromise on updates.
~ 75% of homes sold were either fairly updated or very updated.
~ Sellers began repairing their home 1 to 8 weeks in advance of listing.
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